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Most nations have enacted statutes governing business liquidation and reorganization. These statutes are the primary focus when policymakers and scholars discuss ways to improve laws governing business failure. This focus is misplaced, at least for distressed small businesses in the United States. Evidence from a major credit bureau shows that over eighty percent of these businesses liquidate or reorganize without invoking the formal Bankruptcy Code. The businesses instead invoke procedures derived from the laws of contracts, secured lending, and trusts. These procedures can be cheaper and speedier than a formal bankruptcy filing, but they typically require unanimous consent of senior, secured lenders. This essay identifies the conditions under which a business owner is able to obtain lender consent. The empirical findings point to an important balance between a nation's formal insolvency statutes and alternative modes of liquidation and reorganization. This balance, the essay argues, should play a central role in any discussion of insolvency-law reform.

Purpose– The purpose of this paper is to explore the impact of creditors' undervaluing the total expected cost of a borrower's bankruptcy filing because a portion of the cost will be borne by other lenders. Creditors who bear a smaller portion of the total cost of a personal bankruptcy would be expected to take less care to avoid triggering one.Design/methodology/approach– This paper presents a theoretical model of a creditor's decision of how aggressively to pursue collection. The model shows that because each lender's collection actions increase the probability of bankruptcy, each lender will collect more aggressively when a borrower has many loans. The paper tests the predictions of the model using a large dataset of credit card accounts.Findings– The model highlights an important testable result: holding the level of debt constant, a borrower with many loans is more likely to choose formal bankruptcy and less likely to choose informal bankruptcy, i.e. chronic non-repayment absent a bankruptcy filing. This paper finds evidence that strongly supports the predictions of the model. Laws that limit creditor collection actions do not appear to mitigate the effects of increasing number of loans.Originality/value– While a few papers have tested whether strategic interactions may impact business bankruptcy, no paper of which the author is aware has provided clear empirical evidence of the existence of common pool effects in the personal credit market. These effects point to an important and potentially underappreciated source of risk for borrowers and creditors in this market.

During the Great Depression (1930-1933), over 9,000 banks failed in the United States, while not a single bank failed in Canada. In fact, there have been relatively few instances of bank bankruptcy proceedings in Canada from 1867 to present. Approximately eleven bank bankruptcies have been referenced in the case law to date. The first bank bankruptcy appears to be the Bank of Prince Edward Island (1882). Next came the Exchange Bank of Canada (1883), [FN3] followed by the Maritime Bank (1887), the Central Bank of Canada (1887), La Banque Ville Marie (1899), the Farmers Bank of Canada (1910), the Monarch Bank of Canada (1910), Ontario Bank (1910), [FN9] the Sovereign Bank of Canada (1911), the Bank of Vancouver (1916) and the Home Bank of Canada (1923). It would be another four decades before the next bank bankruptcy took place in 1967, when the Bank of Western Canada was wound up. The few Canadian banks that suffered financial difficulties through the Great Depression, World War II and its aftermath were absorbed into larger banks without creating significant difficulties for their creditors or depositors. Two decades later, Northland Bank (1985) was wound up, followed by the Canadian Commercial Bank (1985). The liquidation of both banks took over a decade to complete. Following the bankruptcies of these Western Canadian banks, Justice William Z. Estey led a commission examining the collapse of the Canadian Commercial Bank and Northland Bank (the "Estey Report"). In this 1986 report, the Commission described a set of circumstances involving severe corporate governance failures and a set of improvident lending procedures not unlike the current situation in the United States. Following the Estey Report, a number of changes were made to the regulatory framework for supervising banks in Canada. The most recent Canadian bank bankruptcy was the Bank of Credit and Commerce International in 1991. This article provides an overview of the legal regime for bank bankruptcy in Canada. The Global Bank Insolvency Initiative: Legal, Institutional, and Regulatory Framework to Deal with Insolvent Banks ("GBI") is used as the framework for locating the Canadian system within an international context. Surprisingly little has been written about bank bankruptcies in North America, with much of the academic focus on developing countries. An obvious explanation for this is that in North America governments do not let banks (or at least major banks) fail. Even if this explanation is accurate, government solutions will often be in the shadow of the formal options for bank failure. Accordingly, an understanding of these options is crucial to comprehending and predicting government action in this regard. An analogy may be drawn to the government bail out of the automobile industry which was set into motion in 2008 and was described as "orderly bankruptcy."

Bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in such procedures impact the economic performance of participating firms in the context of Croatia, which introduced a "pre-bankruptcy settlement" (PBS) process in the wake of the Great Recession of 2007 - 2009. Local institutions left over from the communist era provide annual financial statements for both sides of more than 180,000 debtor-creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delays entry into the standard bankruptcy procedure, leads to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We also track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures to rapidly resolve uncertainty about firms' future prospects.

Many small businesses attempt to reorganize under Chapter 11 of the U.S. Bankruptcy Code, but most are ultimately liquidated instead. Little is known about this shutdown decision. It is widely suspected that the bankruptcy process exhibits a continuation bias, allowing failing businesses to linger under the protection of the court, which resists liquidation even when it is optimal. This paper examines the shutdown decision in a sample of Chapter 11 bankruptcy cases filed in a typical bankruptcy court over the course of a year. The presence of continuation bias is tested along several dimensions—the extent of managerial control over the bankruptcy process, the accuracy and speed with which viable and nonviable businesses are distinguished, and the characteristics of the hazard of shutdown compared with the predictions of a formal model. Contrary to conventional wisdom, the paper finds that continuation bias is either absent or empirically unimportant.

The present article is a comprehensive research focused on the issue of legislative approaches for regulation of bankruptcy in individual countries. The occurrence of economic crises and the globalization in international relations put forward the issue of preserving viable enterprises regardless of any financial hardships arisen and any risk of initiating a court procedure of bankruptcy. The establishment of updated legislation is inextricably bound up with the building up of a theoretical concept of insolvency based on the contemporary doctrinal achievements and practice. The comparative legal analysis of regulations shows the efforts put in science for the creation of a common concept and approach to bankruptcy issues. In this relation, the subject of scientific and research interest are the characteristic features of the legal regulations for handling insolvency in individual countries, determined by their belonging to the two main legal systems: the system of common law and the continental legal system (civil law). The scientific thesis in the present study is that regardless of the specific features of the historical and legal regulation of the bankruptcy concept, currently, a process of introducing rehabilitation procedures of the US legislation (Chapter 11 of Bankruptcy Code) into the individual legal systems of a number of countries in Europe is going on. In this sense, a trend is arising of applying a single legislative approach related to the concept of fresh start of conscientious entrepreneurs and an opportunity of sanitation of their enterprises before the initiation of formal judicial proceedings of bankruptcy on the basis of mutual concessions and compromises made by the creditors.

AbstractMoney markets are at the heart of financialized capitalism, as those markets that provide the funding liquidity needed for credit creation and leveraged trading. How have these markets evolved, grown, and become critical for larger financial flows? To answer this question, I distinguish an early period of financial globalization marked by regulatory arbitrage, offshoring, deregulation, and informal trading practices from a period of regime-consolidation marked by formal institutionalization. Concentrating on repo markets as the key funding sources for market-based banking, I demonstrate that new institutional arrangements for these markets were initiated by private sector associations, but supported and authorized by public authorities. Bond trader groups codified new contractual arrangements and these were validated via reforms of bankruptcy codes and changes in central banks' policy frameworks in the United States and European Union. Through these modifications and re-articulations in institutional conditions, transactions and large exposures on money markets became routine affairs—for shadow banking actors like money market funds as well as for commercial banks. The article concludes by discussing the continuity of regime-consolidation efforts after the transatlantic financial crisis and hypothesizes that they reveal "neo-patrimonial" features.

A growing body of research in economics and in business and economic history has shown the key role of bankruptcy and insolvency law on business organization, firms' governance, and entrepreneurial choices. Most research, however, has focused on the formal aspects of laws, and still little is known on how various systems worked in practices. This paper fills this gap in the literature analyzing the functioning of bankruptcy procedures in four main European economies (Italy, France, England, and Germany) between ca.1880 and 1914. Using an original data set and descriptive statistics on length, organization, and return of procedures, the paper shows how the aim of attracting debtors was more successful in the less regulated English system, but how the protection of creditors' rights was more efficiently pursued in France and Germany. Italy appears as the absolute worst performer.

Research background: Bankruptcy in court proceedings has been of interest to researchers for many years. Researchers look for internal and external factors which influence the effectiveness and efficiency of bankruptcy proceedings; for example, the impact of the country's level of development on the efficiency of bankruptcy proceedings, a system of incentives for the active participation of creditors in bankruptcy proceedings to increase their recovery rate, and mechanisms which encourage the early filing of an application for bankruptcy. Against the background of the research to date, a research gap was identified in the scope of the impact of the bankruptcy (pro-debtor/pro-creditor) law model on the effectiveness of the calculated recovery rate for creditors. The research fills a cognitive gap in New Institutional Economics by examining formal institutions in action, i.e. whether bankruptcy law meets its objectives in practice.Purpose of the article: The aim of the article is to answer the question of which model answers the expectations of stakeholders – creditors who expect the highest possible rate of return. Poland is an example of a country where since 2016 there has been a change in the model of bankruptcy law from pro-creditor to pro-debtor.Methods: The authors of the article conducted constant monitoring of the effectiveness of bankruptcy law in Poland through the examination of bankruptcy proceedings filed in bankruptcy and restructuring courts. The research on the efficiency of bankruptcyproceedings was based on the analysis of files from bankruptcy proceedings conducted at the District Court in Warsaw. The analysis covered the period i) from 01.01.2004 to 31.12.2015 n=150 files of the pro-creditor model of bankruptcy proceedings and ii) from 01.01.2016 to 31.12.2019 n=66 files of the pro-debtor model of bankruptcy proceedings. The statistical analyses were conducted using IBM SPSS Statistics Program Version 26. The Kruskal–Wallis H non-parametric test was employed.Findings & Value added: The results of the research show that the new pro-debtor model of bankruptcy proceedings implemented in Poland after 31 December 2015 is less effective than the previous pro-creditor model of bankruptcy proceedings. In the pro-creditor model, creditors' interests are managed more effectively. Practice shows that frequent changes in the law and model of bankruptcy law do not contribute to its effectiveness and efficiency. It seems that the stabilization of legal solutions is an important factor. The legal activity should be aimed at improving the solutions in force and their consolidation in the case law. Unfortunately, in Poland, entrepreneurs as well as citizens, due to its communist past, do not trust the legal system, formal institutions or other people (ESS 2020). For this reason, the pro-debtor model of bankruptcy proceedings may also have a negative impact on the development of Polish entrepreneurship in the future. To the best of our knowledge, no previous studies have made a comparison of the effectiveness of the pro-creditor and pro-debtor models of bankruptcy proceedings in a transition country such as Poland. Research data encompassing 16 years over the period of 2004–2019 used in the analysis is unprecedented in bankruptcy procedure studies in the post‑transition economies. Also, a set of indicators showing the effectiveness of bankruptcy proceedings employed in the research is unique.

The findings of our study in Mwanza can be interpreted on two different levels. Firstly, they can be read in the light of actors and managers who take decisions in a specific micro-setting influenced, e.g., by the legal form, the age, the size of their respective company. Secondly, results can be analyzed in connection with the general conditions of the labour market in Tanzania. The latter includes a reflection on how different recruitment methods relate to the make up of the supply side. In what follows we will first focus on the micro-setting and then conclude the paper with thoughts related to the labour market in Tanzania. In contrast to data for industrialized countries our investigation shows that in Tanzania formal methods are more often applied for high-ranking positions. Considering the size and legal form of the companies studied several interpretations are possible. A first interpretation is related to the observation that larger companies are significantly more often registered as limited companies. In limited companies managers are employed. They need to justify their decisions to capital owners. The use of formal recruitment methods – it can be assumed – is a managerial strategy to achieve (at least superficial) transparency in decision-making processes. Thus, the organizational structure of the company may relate to the choice of recruitment methods. In the case of large private companies external accountability is added to internal accountability. Advertising for personnel on a national level and therefore adhering to the rules of equal opportunities (as laid down in the Tanzanian labour law) may influence the public image of the company (and its products) positively. A second interpretation refers to small companies which are significantly more often run as sole proprietorships. In case of bankruptcy owners of these companies (unlike managers) are at risk to be liable with private capital. As a result they must have a vital interest in preserving their company´s existence. The employment of people who are trusted, e.g., friends or kin (cf. Trulsson 1997; Egbert 2001) can be seen as an attempt at reducing the risk of fraud. Moreover, informal recruitment channels may be cheaper for the company (cf. De Soto 1989). In case of less qualified positions they allow to scan and reduce the vast pool of job seekers with low or average education to a manageable group which fits the company requirements. Thus the vacancy period is shortened. If we analyze the results on the macro level we have to ask what we can learn about the make up of the Tanzanian labour market. In our study companies seek to fill highranking positions by newspaper advertisements on the national level. This is anindicator that regional labour markets do not provide sufficient or sufficiently qualified personnel. A lack of well-trained professionals in, e.g., management, IT, health and educational sectors is persistent and due to severe inadequacies in training institutions from the primary up to the tertiary level (United Republic of Tanzania 2000). These inadequacies include, among others, understaffing and low salaries, facilitators who in many cases have not received appropriate training themselves, large classes and insufficient infrastructure and equipment. In spite of government efforts to improve training and the mushrooming of private training institutions, only few graduates enter the job market with acceptable skills and knowledge (see also Byemelwa 2009). The placement of advertisements is thus an attempt to attract more applicants from a small pool which is not accessible by social networks only. Comparing vacancy periods for high- and low-ranking positions the patterns found in Tanzania are similar to those in industrialized countries. High-ranking positions are vacant for a significantly longer period than low-ranking positions. The acceptance of longer vacancy periods for high-ranking positions may be related to what has been revealed in recent fake certificate scandals in Tanzania. In some areas of the labour market (e.g., education) large numbers of applicants gained employment through forged documents. In 2008 the National Examinations Council of Tanzania warned private and public organizations to be wary of forgeries and to screen certificates carefully when hiring staff (Machira 2008). A longer vacancy period could then be the outcome of intensified processes of screening the submitted documents. As a consequence, transaction costs (information, search and screening costs) increase. Linking our results to the labour market discussions initially mentioned, different degrees and forms of segmentation become visible. Mobility between the primary and secondary tier of the labour market seems to be extremely restricted due to low standards at national educational institutions. The lack of well-trained workers in the primary sector weakens the impact social capital could have as a criterion for further segmentation. In the secondary sector, however, the state of being unemployed or employed is frequently determined by who you know. Social networks which often rely on stratifying criteria such as ethnicity, gender and religion contribute to the rise of further divisions within the lower tier. A combination of insights from labour market theory and human resource management prepares the avenue for an understanding of these fragmentations.

In this study, we develop a model to examine the dynamics of the insolvency and bankruptcy code (IBC) processes in the aftermath of Covid-19. We use the model to study the impact of the pandemic on the following aspects of the financial disputes and their implications: number of disputes between debtors and their creditors in the aftermath of Covid-19; frequency of these disputes coming to the National Company Law Tribunal (NCLT); impact of the pandemic on the frequency of 'out of court' settlements; the nature of disputes settled amicably and those adjudicated under the corporate insolvency resolution process of the NCLT; and the recovery rates in the settled versus litigated disputes. We show that while the number of disputes will go up, the frequency of settlements will come down in the post-Covid world. Moreover, the post-pandemic legal changes made to the IBC are detrimental to the interest of the micro, small and medium enterprises and also for the formal and informal sector employees. We offer suggestions for promoting out-of-court settlements to save time and costs of the parties involved. Our suggestions related to public policy can help mitigate the macroeconomic costs of the pandemic. JEL Classification Codes: K00, K22, K41, G21

Since Indonesia's new order led by Suharto rose to power, many countries have expressed admiration for the New Order (1966 – 1997), including developed countries, as an efficient and effective government, which was able to drastically reduce inflation and maintain economic growth. Previously, during the Old Order (1956-1965), the Indonesian economy stagnated, with very high inflation, even leading to bankruptcy, as well as conflicts between communists and military institutions. With the military institution winning the conflict, the New Order reversed the way of managing the state which in the Old Order era emphasized excessive political interference, so that economic development was neglected. The New Order state tried to build an economy with a capitalist system whose financing relied heavily on foreign debt and investment. foreign. Economic development is bearing fruit, poverty is reduced, education and health of the Indonesian people are better, but the political sector was controlled by the New Order State in a bureaucratic-authoritarian manner, the masses were demobilized strictly and repressively, even coercively. However, three decades later, the New Order regime was faced with an economic crisis in the mid-1990s and civil society movements and other civil groups demanding democratization of the political system. The community movement succeeded in overthrowing the New Order regime and replaced it with a reform regime. Economic development remains a priority of this reform regime in a capitalistic manner, but the democratic political system it develops is still conventional, procedural democracy, not participatory democracy, which means that although it no longer governs repressively, conventional state institutions remain strong, such as the executive, legislative, and the judiciary, while civil society groups are somewhat neglected.

1. Procedure of bankruptcy in Lithuania is ineffective, what stipulates quite high social costs of bankruptcy.2. Analysis of Lithuanian statistical data showed that significant part of insolvent enterprise (estimated 40%) is neither rehabilitated or reorganized nor liquidated-decision hasn't been made at all. Such situation stipulates enhancing of labilities, what even more complicate liquidation process of insolvent enterprises.3. Problem of diagnostics of insolvency in Lithuania is quite urgent. No one from available criteria of insolvency could be treated as unconditionally acceptable for practical purposes. In the article suggested new accomplished insolvency criteria: balance value of assets reduced by value of pledged property compared to liabilities reduced by sum of credits received for the pledged property. Having in mind that formal criteria could cause procedure of bankruptcy even for firms, which suffer losses temporary, presented insolvency criterion should be tied up to one or several profitability indexes.4. Following change of sequence of fulfillment of financial claims would stipulate increase of efficiency of bankruptcy procedure: after meeting liabilities of collateral holders and employees, all left liabilities should be met proportionally. Government regulates business conditions, so should bear responsibility for impact of economical policy on financial results of business firm. Additionally the highest and the lowest limits of claims of other creditors should be set. That orientated partners of business firms to more extensive use of insurance from various risks and determined the smaller social costs of bankruptcy processes. ; Straipsnyje nagrinėjamas įmonių bankroto procesas Lietuvoje. Atlikta bankrutavusių ir bankrutuojančių įmonių statistinė analizė leidžia atskleisti negatyvias tendencijas Lietuvoje: daugelis nemokių įmonių nei reorganizuojama, nei sanuojama, nei likviduojama, o tai savo ruožtu sąlygoja didelius visuomeninius kaštus. Nagrinėjamos įmonių bankroto proceso neefektyvumo priežastys; ypač akcentuojama įmonės nemokumo kriterijaus bei kreditorinių įsipareigojimų tenkinimo tvarkos reikšmė. Straipsnyje suformuluojamas naujas, tinkamas praktiniam naudojimui įmonės nemokumo kriterijus bei argumentuojama efektyvesnė kreditorinių pretenzijų tenkinimo tvarka.